American Needle - A Victory for Antitrust Laws

A few hours ago, the US Supreme Court issued a unanimous ruling in American Needle Co. v. NFL clarifying that for antitrust purposes, the NFL is not a single entity incapable of "collusion" with itself, but 32 separate entities prohibited from conspiracies or combinations in restraint of trade. American Needle wanted "in" on sports jerseys, but all 32 teams were locked in by league rule to a single manufacturer. That monopolistic arrangement is now dead.

The NFL players' association famously hopped in on the side of American Needle, going so far as to have the winning QB in this year's superbowl submit an editorial to various newspapers. (Note to ghostwriters: nobody ever uses the word "gridiron" outside of the sports pages where a thesaurus is presumed to be a substitute for erudition. Don't do it). The fear of the NFL players was that, if the NFL was successful, it would give the NFL a sort of antitrust exemption in dealing with them, potentially ending free agency as we know it.

This is a big deal because it's one of the first victories for antitrust law in the USSC in 20+ years. Every case has been restricting the scope of that law for decades now.

The broader question is this: who is capable of conspiring with whom? It is axiomatic that one cannot be accused of conspiracy with oneself. Nor can a corporation and its wholly-owned and wholly-controlled subsidiary conspire. But where are the limits of who is considered just "one" person and who is "two or more"? The SC has adopted a functional, not formal test.

"Because the inquiry is one of competitive reality, it is not determinative that two parties to an alleged §1 violation are legally distinct entities. Nor, however, is it determinative that two legally distinct entities have organized themselves under a single umbrella or into a structured joint venture. The question is whether the agreement joins together “independent centers of decisionmaking.” Id., at 769. If it does, the entities are capable of conspiring under §1, and the court must decide whether the restraint of trade is an unreasonable and therefore illegal one."

Similarly, the court also ruled that NFL teams have good justifications for engaging in league activities together, such as scheduling and other coordination, and are not hamstrung by the antitrust laws in doing so.

"The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions. But the conduct at issue in this case is still concerted activity under theSherman Act that is subject to §1 analysis."

This is very, very good news. American Needle is an important corrective decision. Over time, the law tends to ossify. Formalism replaces real world tests as precedent grows. More and more cases are then disposed of by summary adjudication rather than fact-specific inquiry. This is a corrective that puts "common sense" back in the antitrust laws. It will create more litigation because it leads us back to fact-specific inquiries. But this is a good corrective also to Twombly and Iqbal, two recent cases that raised the bar for fact-pleading in federal court. Okay, the Court now seems to be saying, we will require more factual pleading for antitrust cases (and all federal cases, but particularly antitrust), but you will get to make your case about the real-world application of the law to the facts, and will not be trapped by various outmoded factual precedents that have hardened into formal fictions.

It is interesting also that this is both a unanimous opinion and written by Justice Stevens, probably his last unanimous opinion for the court. Clearly, the Court was of one mind in conference and wanted to make a broad statement that the application of antitrust laws here was not a partisan issue.